Sugar Prices Floated Turning Point in Thai Cane and Sugar Industry (Current Issue No. 2885 Full Ed.)

KResearch views that a Cabinet resolution dated December 4, 2017, approving a cut in government subsidies and intervention into sugar prices, was an important shift toward the industry. Prior to the Cabinet decision to amend the Cane and Sugar Law, the public sector assisted cane growers when prices could not cover production costs. But this policy shift lets sugar prices become subject to the market mechanisms and international agreements, also ensuring fairer sugar prices to the general public and industrial consumers.

In our opinion, this price free-float is occurring amid a downtrend in global sugar prices, so, while sugar consumers will thus benefit from lower prices, sugarcane prices in the 2017/18 production year will likely descend lower than last year's THB1,050/ton to THB860-880/ton this year. However, it is expected that the government will prepare assistance measures to mitigate any adverse impact to cane growers, but that would depend on available funding and Thailand's international commitments.

Looking ahead, the cane and sugar industry will now be driven more by market mechanisms and thus all stakeholders will be compelled to explore adequate means to cope with volatility in global sugar prices, even when taking into consideration compliance with international agreements. Viable guidelines may include lowering production costs or increasing returns on production, which would be short term measures that could be realized via increases in the average yield per rai, or higher sugar content in our sugar cane to lift growers' incomes. Over the longer term, promotion and support toward the use of cane and sugar in other manufacturing disciplines with higher added values could be a means to enhance the sustainability of Thailand's cane and sugar industry.